Mortgage bill threat as rates rise

Rising standard variable rates (SVRs) could be part of a ticking time-bomb of repossessions.

A study by consumer group Which? has revealed 70 per c…

Rising standard variable rates (SVRs) could be part of a ticking time-bomb of repossessions.

A study by consumer group Which? has revealed 70 per cent of mortgage holders are worried about an increase in mortgage interest rates.

They may have good reason to feel this way, because rates are rising and Which? has calculated homeowners will have to pay an extra £300 million over the next year as a result.

It found that an increase of £100 a month in payments would leave one-in-five mortgage payers unable to afford daily basics like food, while 11 per cent would reach this crisis point if the cost rose by just £50.

Which? chief executive Peter Vicary-Smith stated a "lack of competition" in the market is driving SVRs up.

He said those who are struggling to meet this debt should contact their lender, but noted not all of them are being helpful.

"It is encouraging that a third of people we spoke to had approached their lender but worryingly in one in five cases, they said their lenders offered no help at all. This is just not good enough and we want to see banks do more to help their customers who are struggling," he remarked.

The situation may get worse if house prices rise and negative equity no longer applies, as this is when banks are more likely to repossess homes, so a major increase in house prices might trigger a significant increase in repossessions.

People who are finding it hard to pay the mortgage or rent should seek debt help, not least because for most people this is the last debt to go unpaid and, therefore, such a situation would usually indicate the situation needs urgent and concerted attention.

At the end of 2011, the Council of Mortgage Lenders predicted that 2012 would see an increase in homes being lost this way.

It noted that the tally of repossessions in the fourth quarter of last year was five per cent upon the equivalent period in 2010.

Posted by Paul Thacker

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